OPEC Maintains Crude Oil Demand Growth Forecast

Crude Oil Price Movements Spot crude oil prices rose in July, mom, as physical market fundamentals and falling oil inventories continued to support oil prices. The OPEC benchmark basket (ORB) averaged $ 73.53 / bbl in July, representing an increase of $ 1.64, or 2.3%, the highest level high since October 2018. Year-to-date, ORB has increased by $ 25.43 or 63.8%, compared to the same period last year, to an average of $ 65.27 / b. Crude oil futures prices also extended their gains in July, supported by the outlook for strong oil market fundamentals. First month ICE Brent rose 88 ¢, or 1.2%, to an average of $ 74.29 / b in July, while NYMEX WTI gained $ 1.08, or 1.5% , for an average of $ 72.43 / b. As a result, the Brent / WTI forward spread narrowed further in July by 20 ¢ to $ 1.86 / bbl, its lowest since October 2020. The market structure of the three major oil benchmarks remained sharply down in July, the outlook for the oil market remaining robust and the process of market rebalancing continued, against a backdrop of further decline in OECD oil stocks. However, hedge funds and other fund managers sharply reduced their net long positions in July, particularly on WTI, after a massive sell-off in US stock markets and increased concerns about the rapid spread of the Delta variant.

Mondial economy
The forecast for global economic growth for 2021 and 2022 has been revised upwards by 0.1 pp, and therefore growth for 2021 is now 5.6%, while growth in 2022 is now expected to be 4, 2%. However, global growth forecasts continue to be affected by uncertainties, including the spread of COVID-19 variants and the pace of vaccine deployment around the world. In addition, sovereign debt levels in many regions, along with inflationary pressures and central bank responses, remain key factors that require close monitoring. After weaker than expected GDP growth in 2Q21, US economic growth for 2021 is revised down to 6.1% from 6.4% previously, while growth for 2022 is revised to 4.1% from 3 , 6%. The economic growth of the euro area in 2021 is revised to 4.7% against 4.1%, while growth for 2022 is revised to 3.8% against 3%. Japan’s economic growth forecast remains at 2.8% for 2021, followed by 2.0% growth in 2022. Meanwhile, China’s economic growth forecast for 2022 is revised down to 6 % against 6.3%, after growth of 8.5% in 2021, unchanged from the previous assessment of the month. India’s growth forecast for 2021 is revised down to 9.3%, followed by 6.8% growth in 2022. Brazil’s growth forecast for 2021 is revised to 4.2% from 3.2%, followed by growth of 2.5% in 2022. Russia’s forecast for 2021 and 2022 is revised upwards by 0.2 pp to stand at 3.2% and 2, respectively, 5%.

Global oil demand
Global oil demand growth expectations for 2021 remained unchanged from the previous month’s assessment. This is despite the slight upward revision in economic growth above, as the upward revised increase in economic recovery is expected to primarily affect non-oil intensive sectors. Oil demand is still estimated to increase by around 6.0 mb / d to an average of 96.6 mb / d. However, some revisions were taken into account in 1Q21 due to slower than expected demand in the OECD Americas, offset by better than expected data from non-OECD countries in 2Q21. For 2022, global oil demand is still expected to increase by 3.3 mb / d year-on-year, unchanged from last month’s estimate. Total world oil demand is expected to exceed the 100 mb / d threshold in 2H22 and reach 99.9 mb / d on average for the whole of 2022. Economic activities are expected to gain further ground, supported by massive stimulus packages . In addition, the COVID-19 pandemic is expected to be controlled through vaccination programs and improved treatment, leading to a further upturn in economic activity and a steady increase in oil demand in OECD and non-OECD countries. .

Global oil supply
The growth forecast for non-OPEC liquids supply in 2021 and 2022 has been revised upwards by 0.27 mb / d and 0.84 mb / d, respectively. These revisions are mainly due to the incorporation of the latest production adjustment decision of the non-OPEC countries participating in the Declaration of Cooperation (DoC), which are now under consideration, following the successful conclusion of the 19th OPEC Ministerial Meeting. and non-OPEC on July 18, 2021. In addition, the supply from the United States and Canada is also subject to revisions this month. Non-OPEC liquids are now expected to grow by 1.1 mb / d in 2021 to reach an average of 64.0 mb / d. The main drivers of supply growth in 2021 are expected to be Canada, Russia, China, the United States, Norway and Brazil, with the United States now expected to experience annual growth of 0.12 mb / j. For 2022, the supply of liquids is now expected to increase by 2.9 mb / d following further incremental production adjustments by non-OPEC members of the DoC, led by Russia at 1.0 mb / d. The United States, with annual growth of 0.8 mb / d, along with Brazil, Norway, Canada and Guyana, will be the other main drivers. OPEC’s NGLs are expected to increase 0.1 mb / d year-on-year in 2021 and 2022 to average 5.2 mb / d and 5.3 mb / d, respectively. OPEC crude oil production in July increased 0.64 mb / d month-on-month, averaging 26.66 mb / d, according to available secondary sources.

Product markets and refining
Operations Global refinery margins trended higher in July, supported by seasonal strength in transportation fuels, with strong performance at the top of a barrel. In the United States, a counter-seasonal decline in refinery utilization rates and subsequent downward pressure on product inventories boosted product markets. In Europe, refining margins benefited from a drop in zone utilization rates recorded at the end of June, as well as a tighter balance in the main product markets due to limited product arrivals. This happened against a background of sustained fuel consumption in road transport linked to softer mobility restrictions. At the same time, healthy regional fuel consumption levels in Asia, as well as strong demand for petrochemical feedstocks have led to gains for clean products.

Oil tanker market
Market developments in July gave little momentum to the sluggish oil tanker market, with dirty freight rates remaining at moderate levels. While demand for tankers is expected to increase in 2H21, reducing some of the excess tonnage available amid increased scrapping, the rapid spread of the Delta variant has added some uncertainty regarding the demand for products and services. crude, potentially pushing the recovery of the oil market further. in 2022.

Raw and refined products
Trade U.S. crude imports remained broadly stable in July at near their 18-month highs, averaging 6.5 mb / d, while crude exports fell back to 2.7 mb / d, in a context of reduced flows to India. Japan’s crude imports plunged nearly 20% month-on-month in June to an average of 1.9 mb / d, undermined by new lockdowns and lower expectations of an increase in consumption due to the Tokyo Olympics. Meanwhile, China’s crude imports rose month-on-month in June, but remained at lower levels, averaging 9.8 mb / d, as government efforts to curb teapot refineries and the crackdown on import quotas and fiscal irregularities have curbed inflows. China’s crude imports are expected to be capped near current levels over the coming months as refiners continue to de-stock under increased government scrutiny. India’s crude imports fell further in June, hitting an eight-month low at 3.9 mb / d, affected by refinery maintenance and the continued impacts of the Delta variant. In contrast, product imports from India rebounded 20% month-on-month to average 0.9 mb / d, driven by a sharp increase in LPG and naphtha inflows, with the return of activity economic.

Commercial stock movements
Preliminary data for June indicates a decline in OECD oil trade stocks of 23.0 mb month on month. At 2,922 MB, inventory is 289.4 MB lower than the same month a year ago, 90.4 MB lower than the last five-year average and 25.2 MB lower than the 2015-2019 average. Within components, crude inventories fell 38.3 mb month on month and product inventories increased 15.3 mb. At 1,416 mb, OECD crude stocks were 96.2 mb below the last five-year average and 70.5 mb below the 2015-2019 average. Measuring 1,507 MB, OECD product inventories posted a gain of 5.8 MB above the last five-year average and 45.3 MB above the 2015-2019 average. In terms of forward hedging days, OECD trade stocks fell 0.9 days in June to 63.6 days. That’s 12.4 days below June 2020 levels, 1.0 day below the last five-year average, but 2.0 days above the 2015-2019 average.

Supply and demand balance
OPEC’s demand for crude in 2021 has been revised downward by 0.2 mb / d from the previous month’s estimate to 27.4 mb / d, or around 4.7 mb / d / d more than in 2020. OPEC’s crude demand in 2022 has been revised down by 1.1 mb / d compared to the previous month’s estimate to stand at 27.6 mb / d, i.e. around 0.2 mb / d more than in 2021.
Source: OPEC

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Felix J. Dixon